Why Iran’s Private Sector hasn’t Benefited from Privatization

Moreover, when the government has pushed for privatization, it has greatly been a cash-raising enterprise. Indeed, paying off debts has been a major driver of the transfer and sale of a great number of enterprises to so-called quasi-state entities — and principally pension funds — as noted by Tayebnia in an Oct. 7 interview with Al-Monitor.

This type of sale occurred on a large scale during the administration of President Mahmoud Ahmadinejad (2005-13). Coupled with the disbursement of “justice shares” — a scheme pursued by Ahmadinejad to bestow shares to low-income groups in a bid to improve income distribution — the value of these ownership transfers amounted to more than 300 trillion rials ($9.47 billion).

Mohammad Reza Pourebrahimi, a member of parliament and member of the parliamentary Economic Commission, in a June 25 interview with Nama News, questioned the very nature of such share divestments. Addressing the failure of privatization in Iran compared with developed countries, he noted, “The outcome is worse than the time before the share transfers.” Commenting on figures on privatizations conducted by the IPO, Pourebrahimi said 25% of such entities were divested to the Civil Servants Retirement Organization, 15% to the Farmers, Villagers and Nomads’ Social Insurance Fund and 25% to the Social Security Organization.

What is of particular note in the view of Pourebrahimi is that the managers of these funds are appointed by the minister of cooperatives, labor and social welfare. This is fundamentally at odds with one key aspect of privatization in itself.

According to the IPO, merely a small fraction of state-owned enterprises, estimated at about 5%, have actually been divested to what would be regarded as the real private sector, as opposed to quasi-state entities and the like. This has meant that factors such as “promoting quality, raising productivity and increasing efficiency were untapped,” said Hossein Abdo Tabrizi, an adviser to the minister of roads and urban development, at a roundtable held by AyandeNegar, a publication affiliated with the Tehran Chamber of Commerce.

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